I met a woman a while back in the grocery st ore. She had a cart full of groceries and a handful of coupons. As we waited in line, she asked: “Kristi, when is it going to get better?” The cost of those groceries, of healthcare, of childcare — all were going up. But she hadn’t gotten a raise in years.
I’ve been thinking about that young woman a lot lately. She, like so many South Dakota families, faces that financial pinch every day. When will it get better? Earlier this month, we released a once-in-a-generation tax reform package that I’m optimistic will begin to answer that question.
The bill — appropriately named the Tax Cuts and Jobs Act — is designed to strengthen families and offer a more optimistic future for all Americans. More specifically, we significantly lower individual tax rates and nearly double the standard deduction. We also simplify the tax code so an individual or family can file their taxes on a form as simple as a postcard. Think of the stress that would save come tax time.
We also provide unprecedented support for families, increasing the Child Tax Credit to $1,600 per child, eliminating the marriage penalty, preserving the Child Care Credit, and creating a new Family Flexibility Credit.
The Death Tax is fully and completely repealed by 2024, and we double the exemption between now and then. Farmers and ranchers, along with other businesses, will be able to immediately write off the full cost of new equipment, which is critical for agriculture.
No changes are made to popular retirement savings options, such as the 401(k) or IRA. And we open the door for employers to create more jobs and raise wages by offering a historically low small business tax rate and lowering the corporate tax rate to a globally competitive 20 percent.
I know I just threw a lot of numbers at you, so let me explain what it would mean for a typical family. Imagine this: Phil and Kate have two children in middle school. She works at the bank in town; he works for an area farmer. Together, they make $59,000 a year.
As a result of the lower tax rates, a significantly larger standard deduction, an enhanced Child Tax Credit and the new Family Flexibility Credit, Phil and Kate would see their total tax bill drop from $1,582 to $400. That’s more money they can use for whatever is important to them, whether it’s paying bills, buying a new fridge, or putting away savings for the future.
Let’s look at another example. Meet Beth. Two years ago, she opened Beth’s Pizza Place. This year, she expects to earn around $62,000 in net income. Under today’s tax code, Beth would pay a little over $8,600 in taxes, but under our plan, her tax bill would fall by more than $3,000, freeing up money to install a new oven or give her employees a little raise.
While nothing will be perfect in everyone’s eyes, I’m optimistic about the impact this package could make in the lives of South Dakotans, including that woman I met in the grocery store. It’s taken years to get to his point, but it’s essential we get this right. For kids about to graduate from college, this could be the tax code they live by for much of their adult lives.
As the first South Dakotan in history to serve on the committee that’s responsible for tax reform, I’m deeply honored to give our state a seat at this table. I was talking with President Trump just after we introduced the bill. His optimism about our plan and commitment to getting it done was beyond encouraging.
The Tax Cuts and Jobs Act will be debated in my committee for a few more weeks before the full House votes on it. If you’d like to follow along or share your thoughts on it, please visit Noem.House.gov/TaxReform